Remittances and their microeconomic impacts: evidence from Latin America

The flow of remittances to Latin American and Caribbean countries is the highest and fastest growing in the world, exceeding foreign direct investment and net official development assistance to the region. Remittances surpass tourism income and almost always exceed revenues from the largest export in these countries, accounting for at least 10 percent of gross domestic product in six of them. Furthermore, remittances are the least volatile source of foreign exchange in many of these economies, thus playing a crucial role in economic development. ; In what follows, I provide a general overview of the remitting patterns of migrants to the U.S. who are from Costa Rica, the Dominican Republic, Haiti, Mexico, Nicaragua, and Peru. Subsequently, I summarize some microeconomic evidence of the impact that remittances have on various spheres of economic development, as is the case with employment, business ownership, education, and health care investments in two LAC economies. These findings underscore the importance of remittances as a resource for the accumulation of human capital investments in education and health and as a determinant of employment patterns in remittance-receiving households in developing economies.